2018-03-26

China Wins Round One of Trade Dispute

ZH: US, China Said To Near Deal To Avert "Tit-For-Tat" Trade War
And although nothing has been finalized, Liu has assured Mnuchin that China would cave on several US demands, including allowing foreign investment in Chinese securities firms and offering to buy more semiconductors from US semiconductor firms, the FT reported. There's also been talks that China could loosen restrictions on foreign investment in manufacturing, telecom, medical and education.
Wall Street and Beijing win again if this is the bulk of a final deal, since it will do very little to boost U.S. employment or protect strategic industries in the U.S.

This part explains how things may play out moving forward:
It's also unclear how Washington might react to Beijing’s proposal that Chinese firms buy more semiconductors from the US because that would disadvantage South Korea and Taiwan, two of the US's most important allies in the region.

"The US would basically be stealing from their surpluses with China," one person said.

In an interview with Chinese media published Monday, Li Keqiang emphasized that there was no point in a trade war between the US and China, and that the two sides would come to a reasonable solution.
In a zero sum game (a global economy barely growing), one solution to a trade dispute is to shift your deficit away from weak countries and towards strong countries. Additionally, if you know your Chinese history, they are drawing the United States into a dependent bilateral relationship which China will eventually come to dominate.

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